Subsea 7 Delivers Strong Operational Performance

Subsea 7 has announced results for the fourth quarter and the full year which ended on 31 December 2013. 

Full year 2013

Jean Cahuzac, Chief Executive Officer said: “In 2013, Subsea 7 delivered strong operational performance through successful execution across its business portfolio, with the exception of the Guará-Lula NE project in Brazil.

“Revenue for the full year 2013 was $6.3 billion, which matched that achieved in 2012. The Group’s profitability for the year, as reflected in Adjusted EBITDA of $981 million, was impacted by an additional full-life project loss provision of $355 million taken in the year on the Guará-Lula NE project, of which $49 million was recognised in the fourth quarter.

“We were successful in winning business in 2013, which was reflected in the quality of our order intake and focus on contracts with an acceptable risk profile.

“Reflecting the robust financial position and good long-term prospects of the Group, and in addition to the continuing $200 million share repurchase programme that commenced in the final quarter of 2013, the Board of Directors has recommended that shareholders approve a special dividend of NOK 3.60 per share at the next Annual General Meeting on 27 June 2014.

Fourth quarter 2013

“The Group’s revenue in the fourth quarter of 2013 was moderated by lower vessel capacity and utilisation in the North Sea compared with the same prior year period.

“The additional full-life project loss provision of $49 million on the Guará-Lula NE project was due largely to the decision to mobilise an extra vessel on the project to accelerate project execution during the Brazilian summer season. It also included a provision for costs related to the revised risers installation schedule.

“The record backlog we had achieved at the end of Q3 2013 was maintained in the quarter. Major project awards in the fourth quarter included the TEN project, offshore Ghana, and the renewal of two long-term PLSV contracts with Petrobras.

Operational highlights for the fourth quarter 2013

“In the North Sea and Canada, good progress was made on a number of projects. In the UK sector, the Otter project was completed. In the Norwegian sector, the Knarr and Oseberg Delta S2 projects progressed significantly. The Terra Nova contract in Canada was completed successfully. Life-of-Field work continued with a high level of activity for Shell, BP, Total and the operator consortium DSVi.

“In Angola, the CLOV project progressed well with the successful installation of two hybrid riser towers during the offshore campaign led by the Seven Borealis. The Block 31 PSVM project neared completion in the quarter, while Block 31 GES entered the early part of its offshore phase.

“The Guará-Lula NE project in Brazil reached a number of operational milestones in the quarter, with the installation of the first buoy and some associated risers as well as the mobilisation offshore of the second buoy. Separately, the offshore phase of the Sapinhoá project was completed in the quarter using the Seven Seas.

“Activity in Australia was dominated by the Gorgon Heavy Lift and Tie-ins project, with efforts in the fourth quarter concentrated on preparing to mobilise for the offshore phase.

Outlook

“Conflicting pressures on the use of capital by major oil and gas companies, combined with a flat oil price and cost inflation, resulted in a lower level of tendering and market award activity for large EPIC contracts in the latter part of 2013. Life-of-Field and smaller project work in the North Sea remains relatively stable and is increasing in the Gulf of Mexico, albeit from a low level.

“Tendering activity in early 2014 has increased for SURF projects in Africa. While this is encouraging, it must be remembered that there is typically a two-year period between tendering and the start of the offshore phase of such projects. The trend for market awards for large SURF projects to be postponed, for a variety of reasons, is continuing. We therefore expect our order backlog to decline during the first half of 2014.

“In light of this environment, the Group’s revenue for 2014 is nevertheless expected to increase from that realised in 2013. Adjusted EBITDA for 2014 is anticipated to increase moderately from that achieved in 2013 after adding back the full-life project loss provision recognised on the Guará-Lula NE project in 2013.

“We remain positive about the medium and long-term prospects for our business, which is supported by a strong fundamental outlook for deepwater subsea field developments. To support this view, our vessel construction programme with six new-build vessels (four of which are committed on long-term contracts in Brazil), is proceeding on schedule and within our cost estimates. Owing to the phasing of vessel construction payments, the Group’s capital expenditure for 2014 will be higher than in 2013.”